Multinational Corporations are companies that operate all their operations in two or more countries while being based in one country. The main reason for outsourcing these activities is to significantly reduce their costs to increase their margins. This benefits not only the consumers with the low prices but also helps these companies to make sufficient profits on goods and services sold. The biggest measure taken by the Multinational Corporations to ensure low costs and prices is by outsourcing most of the activities from countries with cheap resources.
Some of the main operations taken place by the MNC's are:
Import and Export of goods and services
Making big investments in foreign countries
Buying and selling licenses of goods and services
Making agreements with manufacturers in foreign lands on contract
Opening Manufacturing facilities for assembly process
Major Advantages of Multinational Corporations are:-
Low operating costs- By conducting most of the operations overseas, the company can set up their operations where they can find raw materials, labour etc at the lowest costs.
Low Taxes- The companies can run their businesses in countries with the lowest tax rates. This would help them increase their margins and make more profits.
Benefits to Consumers- Since the companies have low operating costs and low taxes, they can sell their products at a cheaper rate. This benefits the consumers to buy the products cheaply.
Benefits to Countries- Despite the low tax rates, these companies help increase the tax revenues of countries and also provide employment to the local population. This helps increase the economy of the country.
Some Cons of Multinational Corporations:-
Multinational Corporations may dominate the market in an uncontrolled manner- Since these companies have the capital to produce in large scale, it makes them easy to sell products at a very cheap rate. This poses heavy competition with other relatively smaller companies which eventually makes them go out of business. For Example, In November 2012, Walmart was not allowed to establish its network in India because majority of this country"s population is involved in having their own SMSE'S (Small and Medium Scale Enterprises). The Indian Government found that these small enterprises will never be able to match the scale at which Walmart sells these products. This would lead to massive unemployment which could affect the Indian economy.
Multinational Corporations want to acquire profits at any cost- Most of the Multinational Corporations have a capitalistic mindset and don't show much of importance on many aspects but money. Since profit is the main motive of these companies, other cultural and environmental aspects are often ignored.
Even though we see most of the Multinational Corporations have capitalistic mindset, there are a few companies that do have a socialistic view of the world. These companies are measured using Reptrak score which is a measure used to indicate how much emotional connection consumers have towards a brand. The score is measured using various different criteria such as sales of a company, how much people would recommend this company and also how well it treats its employees.
Rolex, the British watchmakers, have the highest score of 80.38 followed by the Danish toy company Lego with 79.46. The top 25 companies with highest Reptrak score may contain some of our favourite brands like Nike, Adidas etc, but these companies have gone over a long period of losses and have reached the break even point at a much later stage since their incorporation which is not a healthy position for any company with respect to investing in the business.
Question- Do you feel that the Multinational Corporations would flourish better if they follow a more socialistic approach or capitalistic approach??
Multinational Corporations I
Multinational Corporations are companies that operate all their operations in two or more countries while being based in one country. The main reason for outsourcing these activities is to significantly reduce their costs to increase their margins. This benefits not only the consumers with the low prices but also helps these companies to make sufficient profits on goods and services sold. The biggest measure taken by the Multinational Corporations to ensure low costs and prices is by outsourcing most of the activities from countries with cheap resources.
Some of the main operations taken place by the MNC's are:
Major Advantages of Multinational Corporations are:-
Some Cons of Multinational Corporations:-
Even though we see most of the Multinational Corporations have capitalistic mindset, there are a few companies that do have a socialistic view of the world. These companies are measured using Reptrak score which is a measure used to indicate how much emotional connection consumers have towards a brand. The score is measured using various different criteria such as sales of a company, how much people would recommend this company and also how well it treats its employees.
Rolex, the British watchmakers, have the highest score of 80.38 followed by the Danish toy company Lego with 79.46. The top 25 companies with highest Reptrak score may contain some of our favourite brands like Nike, Adidas etc, but these companies have gone over a long period of losses and have reached the break even point at a much later stage since their incorporation which is not a healthy position for any company with respect to investing in the business.
Question- Do you feel that the Multinational Corporations would flourish better if they follow a more socialistic approach or capitalistic approach??
Bibliography:-
Lister,John. "The Advantages of Multinational Organisations." Chron.com. Accessed November 16, 2017.
http://smallbusiness.chron.com/advantages-multinational-organisations-20820.html.
Anonymous. "17 Main Pros and Cons of Multinational Corporations." Green Garage. August 19, 2015. Accessed November 16, 2017. https://greengarageblog.org/17-main-pros-and-cons-of-multinational-corporations.
Strauss, Karsten. "The World's Most Reputable Companies In 2017." Forbes. March 02, 2017. Accessed November 19, 2017. https://www.forbes.com/sites/karstenstrauss/2017/02/28/the-worlds-most-reputable-companies-in-2017/#6475ca452fe3.
Anonymous. "About RepTrak®." Reputation Institute. Accessed November 19, 2017. https://www.reputationinstitute.com/reputation-measurement-services/reptrak-framework.